Wages dilemma-Ltd or umbrella co
Comments
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I used Parasol. No problems either joining or leaving. There 'customer' support was good too.0
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Despite your original post, I would advise setting up a Ltd. company aganist going with an umbrella. It's very cheap and easy to do, and a good accountant will charge way less than the umbrella co. will charge you. You'll end up with a heck of a lot more take-home pay ( all completely legal !! ), and if you want to dissolve the company at a later date then no problem.
If you do want to go with an umbrella, then avoid Orange Genie - bunch of cowboys !!0 -
Has anyone found that using an Umbrella Company for agency work is beneficial? The initial hourly rate appears to be more by about 15%. However, I have heard stories that you could end up paying more in NI contributions (up to 50% of your "wage") as an employee as well as an employer and the Agency gets out of their employment rights to you including pension rights. Any views?0
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It's been a few years since I last used an Umbrella Company. At the time the Employer's National Insurance was a big watch out, yes.
You're correct that you would have to sort out your own pension. Though the Umbrella Company should be able to pay into a pension for you in a tax efficient way if that's what you're after.
Don't forget that you also don't get any holiday pay, which is about 12.07% of your wage. Add the 13.8% Employer's National Insurance and you're already at 25.87%.
Not getting sick pay is also a point against Umbrella Companies, the percentage value of this is harder to quantify though.
If the extra pay is only 15% I would choose to get paid by the agency, if I had a choice.0 -
Thanks, I think that is probably wise.0
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I am just experiencing my first umbrella company and I'm not impressed. They have deducted just over 20% (before my tax and NI) which was not itemised on their "invoice reconciliation" form. I phoned up to have it explained and discovered that it was made up of the Employer's National Insurance, which I pay as well as my own Employee's NI! How can this be right? I was assured it was, and it's all about how it is accounted for, but it sounds like BS to me. Even if it is legal, then I find it immoral. Why should I pay the Employer's part of the NI contribution??
The other components of the 20%+ deduction were holiday pay, which I have opted to have paid weekly now, and membership to their benefit scheme of discounts and e-vouchers etc., which I have now cancelled.
There is also an "Apprenticeship Levy" ??? I'm not an apprentice, far from it - I have worked for nearly 40 years in education, but it's less than £2/week so I'm regarding it as my support for young apprentices...
And finally a contribution to "Gap pay" which sounds like it might be useful - a payment in between assignments while I'm looking for work, but there are lots of rules about what to fill in and when, which weren't explained to me in detail, but will be " when I'm in that situation".
Maybe I should have spent some of my years in education doing a qualification in creative accounting, as that's what it looks like to me.
Sadly, the agency I got this (temporary - until Christmas, 2 days a week) assignment from do not pay directly, so I had no option but to go with the umbrella company. Am I allowed to name it on here?
Does anyone else have experience of them? i searched the threads before posting this but only found a couple which were from people wanting to use them as employers.0 -
Hi, My daughter is in need of an umbrella company.
I was hoping someone on this forum might be able to recommend a good one?
I understand the NI contributions and holiday pay. The apprenticeship levy charge is probably because the company you are using has to pay a % of the turnover each month to the government and are passing on the costs.
I was a little confused by the pay gap contribution - I would ask for full details of all deductions they are taking and take the time to digest them. What if you are not out of work. Do you get your contributions returned to you?
This is all a bit new to me. I used to know people who used good ones but alas no longer in touch with them hence searching out a reliable good one for my daughter.0 -
Speaking from the point of view of an IT Contractor who has used a brolly, the reason you pay both Employees and Employers NI is because you are responsible for both taxes. In a normal PAYE permanent job, your employer would pay their share of NI. But in an umbrella, although you are employed by them for the purposes of payroll management, you are effectively a one-person company. Who else would pay your employers NI? Not the client as they don't employ you and not the brolly as they exist merely to do your paperwork.
Morals don't come into it I'm afraid, you are liable for all these taxes as you're effectively a one man company. The brolly will charge a fee for their services and this is all you can really shop around for as the services they provide will always be the same. I agree it seems a little harsh, coupled with the fact that whilst you're taxed the same as any other PAYE employee, you are not lawfully entitled to any benefits such as sick pay or paid leave.
I can recommend contractorumbrella who have calculators to show how much you will pay in tax and how it's broken down. They are also very helpful if you have any queries.
P.S. Don't be tempted by any organisation offering to give you 80% of your salary or higher. Those are dodgy schemes and WILL be closed down by HMRC potentially leaving you with a hefty tax bill.0 -
I am just experiencing my first umbrella company and I'm not impressed. They have deducted just over 20% (before my tax and NI) which was not itemised on their "invoice reconciliation" form. I phoned up to have it explained and discovered that it was made up of the Employer's National Insurance, which I pay as well as my own Employee's NI! How can this be right? I was assured it was, and it's all about how it is accounted for, but it sounds like BS to me. Even if it is legal, then I find it immoral. Why should I pay the Employer's part of the NI contribution??
The other components of the 20%+ deduction were holiday pay, which I have opted to have paid weekly now, and membership to their benefit scheme of discounts and e-vouchers etc., which I have now cancelled.
There is also an "Apprenticeship Levy" ??? I'm not an apprentice, far from it - I have worked for nearly 40 years in education, but it's less than £2/week so I'm regarding it as my support for young apprentices...
And finally a contribution to "Gap pay" which sounds like it might be useful - a payment in between assignments while I'm looking for work, but there are lots of rules about what to fill in and when, which weren't explained to me in detail, but will be " when I'm in that situation".
Maybe I should have spent some of my years in education doing a qualification in creative accounting, as that's what it looks like to me.
Sadly, the agency I got this (temporary - until Christmas, 2 days a week) assignment from do not pay directly, so I had no option but to go with the umbrella company. Am I allowed to name it on here?
Does anyone else have experience of them? i searched the threads before posting this but only found a couple which were from people wanting to use them as employers.
Yup.
The end client pays a flat day rate for you and all deductions come out of that.
Even if the agency could pay you directly, they'd be obliged to make the same deductions0 -
bambleweeny57 wrote: »Speaking from the point of view of an IT Contractor who has used a brolly, the reason you pay both Employees and Employers NI is because you are responsible for both taxes. In a normal PAYE permanent job, your employer would pay their share of NI. But in an umbrella, although you are employed by them for the purposes of payroll management, you are effectively a one-person company. Who else would pay your employers NI? Not the client as they don't employ you and not the brolly as they exist merely to do your paperwork.
Morals don't come into it I'm afraid, you are liable for all these taxes as you're effectively a one man company. The brolly will charge a fee for their services and this is all you can really shop around for as the services they provide will always be the same. I agree it seems a little harsh, coupled with the fact that whilst you're taxed the same as any other PAYE employee, you are not lawfully entitled to any benefits such as sick pay or paid leave.
I can recommend contractorumbrella who have calculators to show how much you will pay in tax and how it's broken down. They are also very helpful if you have any queries.
P.S. Don't be tempted by any organisation offering to give you 80% of your salary or higher. Those are dodgy schemes and WILL be closed down by HMRC potentially leaving you with a hefty tax bill.
Good summary and i too would recommend contractorumbrella.0
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